Facebook Inc said on Monday it will start breaking out the financials for its virtual and augmented reality unit, an announcement that comes as its main advertising businesses face “significant uncertainty.”
Facebook warned that Apple Inc’s new privacy rules would weigh on its digital business in the current quarter, after the social media company reported quarterly revenue below market expectations.
Chief Financial Officer David Wehner also said Facebook expected its investment in its hardware division, Facebook Reality Labs, to reduce overall operating profit in 2021 by approximately $10 billion.
The financial commitment by the world’s largest social media company to building the “metaverse” https://www.reuters.com/technology/facebook-sets-up-new-team-work-metaverse-2021-07-26 comes as the company is swamped by coverage of documents leaked by former Facebook employee and whistleblower Frances Haugen which she said showed the company chose profit over user safety. Facebook has said Haugen mischaracterized its work.
Chief Executive Officer Mark Zuckerberg has said Facebook in the coming years will be seen as metaverse company rather than a social media company, as it makes a number of investments to expand the technology.
The metaverse, a term first coined in a dystopian novel three decades earlier, has attracted much buzz across Silicon Valley. It refers broadly to a shared virtual environment which can be accessed by people using different devices.
Facebook, which has invested heavily in virtual reality (VR)and augmented reality (AR), including buying companies like Oculus, this year created a product team to work on the metaverse. This month, it said it plans to hire 10,000 employees in Europe over the next five years to work on this initiative.
Wehner said that starting in the fourth quarter of 2021, it would break out FRL as a separate reporting segment from Facebook’s family of apps.
Shares of the company were trading up about 2% at $336 in extended trading on Monday. Facebook, whose shares have gained about 20% so far this year, is about $85 billion away from regaining a spot on the $1 trillion club and joining new entrant Tesla Inc.
The world’s largest social media network is under scrutiny from global lawmakers and regulators, including from the Federal Trade Commission which has filed an antitrust lawsuit alleging anticompetitive practices.
The whistleblower documents, which were first reported by the Wall Street Journal, have intensified scrutiny on the company. They include internal research and reports about Instagram’s effects on the mental health of teens and about whether its platforms stoke divisions, as well as its handling of activity around the Jan. 6 Capitol riot and inconsistencies in the company’s content moderation for users around the globe.
Reuters on Monday reported that Facebook employees have warned the company was failing to police rule-breaking content in countries where it was likely to cause the most harm, according to former employees and the cache of disclosures made to the U.S. Securities and Exchange Commission and Congress by Haugen.
Facebook said it expects fourth-quarter revenue to be in a range of $31.5 billion to $34 billion. Analysts had forecast $34.84 billion in revenue, or a 24.1% jump, according to IBES data from Refinitiv.
Its third-quarter revenue too faced the brunt of Apple’s privacy rules that made it harder for brands to target and measure their ads on Facebook.
Daily active users, a metric watched closely by advertisers and investors, grew 6% to 1.93 billion from a year ago, matching expectations.
The company’s total revenue, which primarily consists of ad sales, rose to $29.01 billion in the third quarter from $21.47 billion a year earlier, missing analysts’ estimates of $29.57 billion.
Facebook said it repurchased $14.37 billion in stock during the third quarter and announced an additional $50 billion in share buybacks.
The company did not announce any new name as part of an expected rebranding effort. In response to the Verge’s report last week on its name-change plans, Facebook said it does not comment on “rumor or speculation.”
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